Views of Value and Competency How Stakeholder and Internal Auditor Perspectives Compare

Views of Value and CompetencyHow Stakeholder and Internal Auditor Perspectives Compare

AgendaResearch ProjectResults

◦Competencies◦Value◦Overall

What Can You Do?CBOK 2015

The Project

Sponsored by the Institute of Internal Auditors Research Foundation

Championed by Larry Harrington, Vice President of Internal Audit, Raytheon

Researchers:◦ Vu Pham, Ph.D., Managing

Partner, Spectrum Knowledge, Inc.

◦ Betsy Bosak, Ed.D., Partner, Spectrum Knowledge, Inc.

Research QuestionsHow do stakeholders rate internal

auditors on the competencies internal auditors use to do their jobs?

How do stakeholders rate the internal audit activity on the value it provides?

How do stakeholders’ perceptions compare to internal auditors’ perceptions about themselves?

Research PlanSurveys

◦2010 Common Body of Knowledge (CBOK)

◦IIA’s Global Internal Audit Competency Framework

Focus Groups◦Stakeholders – 12 participants◦Internal Auditors – 12 participants◦Validated survey questions◦Assisted in interpretation of results

Distribution of Responses

Internal Auditors

Stakeholders

0% 20% 40% 60% 80%100%

45%

29%

38%

34%

18%

38%

Individual Contribu-torManagement/SupervisorExecutive/Upper Management

Analysis of Responses

Scale: ◦ 1 = Poor ◦ 2 = Marginal◦ 3 = Fair◦ 4 = Very Good◦ 5 = Excellent

Categories

◦ Negative/Neutral (Poor, Marginal, Fair)

◦ Positive (Very Good, Excellent)

Competencies

Value

Scale of 1 (No Extent) – 5 (Great Extent)

Competencies

Categories of Competencies

General

Behavioral

Technical

Most Important Competencies

Confidentiality (behavioral)Objectivity (behavioral)Communication skills (general)Communication (behavioral)Problem-identification and solution skills (general)Judgment (behavioral)Works well with all management levels

(behavioral)Understanding the business (technical)Risk analysis and control assessment techniques

(technical)Governance and ethics sensitivity (behavioral)

Highest-Rated Competencies

Maintains Con-fidentiality

Ethics Professionalism Objectivity0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100% 94% 95%89% 91%91% 90% 87%

79%

Internal Auditors Stakeholders

Most Important Competencies

ConfidentialityObjectivityCommunication skills (general)Communication (behavioral)Problem-identification and solution skillsJudgmentWorks well with all management levelsUnderstanding the businessRisk analysis and control assessment

techniquesGovernance and ethics sensitivity

Lowest-Rated Competencies

0%

20%

40%

60%

80%64% 62%

72%58%59% 60% 59%

69%

Internal Auditors Stakeholders

Largest GapsUnderstanding the BusinessProblem-Solving SkillsJudgmentBusiness Process AnalysisProblem-Identification SkillsObjectivityData Collection and Analysis

Tools and Techniques

A CLOSER LOOK AT THE GAPS

Understanding the Business

Possible reasons:◦ Different

expectations◦ Auditors not

asking the right questions

◦ Communication challenges/barriers

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

83%

61%

Internal AuditorsStakeholders

Understanding the Business

Ideas to address the gap:◦Better planning◦Relationship-building

What are management’s needs? Communication

◦Training and Development Management – value and capabilities of

audit Audit staff – communication skills,

business-related

◦Auditor Rotation

Problem Identification/Solving

Possible Reasons:◦ Need for a better

understanding of the client’s business

◦ Communications challenges/barriers

◦ Need to better collaborate on recommendations

Problem Identification

Problem Solving

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

82% 79%70%

63%

Internal AuditorsStakeholders

Problem Identification/Solving

Ideas to address the gap:◦Increased communications

Earlier notification and more in-depth discussion of issues

◦Relationship-building Collaboration on developing

recommendations

◦Training Critical thinking – root cause analysis Strategic thinking – data analytics, assessing

data reliability Problem solving

Judgment/ObjectivityPossible

Reasons:◦ Not

understanding the audit process

◦ Surprises in audit reports

Judgment Objectivity0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

86%91%

72%79%

Internal AuditorsStakeholders

Judgment/ObjectivityIdeas to address the gap:

◦Establish what can be expected Audit Charter Strong Entrance Conferences

◦Routine communication throughout audit

◦Issue Sheets As issues arise

Other Lower-Rated CompetenciesConflict Resolution/Negotiation

Skills◦Training◦Practice

Ability to Demonstrate/Promote the Value of the Internal Audit Function◦Participation on task forces◦Assignment to special projects◦Communications during audits

Putting the Results to Action

Capitalize on the highest rated competencies◦What services can you offer that

include these?◦How do you get the word out?

Identify training opportunities for competencies rated lower

Perceptions of Value

IIA Value Proposition

AssuranceGovernance, Risk,

ControlInsight

Catalyst, Analyses, Assessments

ObjectivityIntegrity, Accountability,

Independence

Survey QuestionsTo what extent do you feel the internal

audit function adds value to your organization?

To what extent does internal audit have visibility in your organization?

To what extent is internal audit respected in your organization?

Overall, how would you rate the performance of the internal audit function?

Adding Value

1 2 3 4 50%

5%

10%

15%

20%

25%

30%

35%

40%

0%2%

22%

38% 38%

3% 3%

28% 29%

37%

Internal Auditors Stakeholders

Average Rating: Internal Auditors – 4.1 Stakeholders – 3.9

Improving Perceptions of Value

Increase awareness and education

Market the internal audit activity

Highlight the highest rated competencies

Gain support for audit activities from all levels of management

Improving Perceptions of Value

Improve communication

Build client relationships

Provide practical solutions

Visibility

1 2 3 4 50%

5%

10%

15%

20%

25%

30%

35%

40%

1%4%

32%

37%

27%

3%5%

26%

34%32%

Internal Audit Stakeholders

Average Rating: Internal Auditors – 3.9 Stakeholders – 3.9

Increasing VisibilityObtain a “seat at the table”

Market the internal audit activity

Make audit reports available to staff

Build relationships

Get audit staff involved

Extent of Respect

1 2 3 4 50%

5%

10%

15%

20%

25%

30%

35%

40%

1%

9%

38% 37%

15%

3%

10%

38%

30%

20%

Internal Auditors Stakeholders

Average Rating: Internal Auditors – 3.6 Stakeholders – 3.5

Gaining RespectDeliver

Build awareness of senior management’s support

Improve perceptions throughout the organization’s culture

Gaining RespectStress the importance of internal

audit in management training

Increase education and awareness

Relationship building

Training

Overall Performance

1 2 3 4 50%

10%

20%

30%

40%

50%

60%

70%

1% 3%

22%

65%

10%

2%

9%

26%

47%

16%

Internal Auditors Stakeholders

Average Rating: Internal Auditors – 3.8 Stakeholders – 3.6

The Bottom LineLeverage strengths related to

confidentiality, ethics, and professionalism.

Enhance skills and communication related to understanding business, solving problems, objectivity, and judgment.

Continue to build recognition.

Some Things To Think About

Is this reflective of what you would see if you compared your ratings with your stakeholders?

How can some of these gaps be reduced?

How can some of the lower rated competencies be strengthened?

What else needs to be done?

What Can You Do?Administer a similar survey – to your

stakeholders and internal audit staff

Identify and capitalize on your strengths

Develop goals and action plans to address areas identified as weaknesses

Incorporate the information into your annual internal assessment

CBOK 2015Practitioner Survey open until

3/27◦Google CBOK Resource Exchange

Planned Deliverables:◦Core Reports◦Fast Facts◦More In-Depth Looks◦Database for Future Research

Any Questions?Contact Information:

Karin Hill, CIA, CGAP, CRMADirector of Internal Audit

Dept. of Assistive and Rehabilitative Services

Karin.Hill@dars.state.tx.us512-424-4021